Monday, July 27, 2009

ICICI Bank net zooms 21% in Q1 to Rs 878 cr

Extreme cost-cutting and treasury profits enabled the country’s largest private lender, ICICI Bank, beat analyst estimates and post a 21% rise in net profit in the first quarter of FY10 (Apr-Mar), the bank said on Saturday. Net profit stood at Rs 878 cr for the quarter-ended June ‘09 against Rs 728 cr in the year-earlier quarter. The average net profit forecast by various banking analysts was around Rs 820cr.

Besides profits from trading in government securities and equity, the bank was helped by a write-back of provisions made on credit derivatives as sentiment improved on Indian paper.

Profits rose even as the bank continued to shrink its balance sheet, avoiding high-cost deposits and unsecured advances. One reason for the higher profit was the Rs 367-cr savings in operating expenses during the quarter with overall operating expenses dropping 19.22% to Rs 1546 from Rs 1913 cr in the corresponding quarter of the previous fiscal.

“Instead of balance sheet size, we will focus on bringing down unsecured personal loans. We will however grow home, car and commercial vehicle loans on the retail side and working capital and infrastructure loans on the corporate side,” said Chanda Kochhar, MD & CEO, ICICI Bank. The bank’s advances declined by 9.2% while deposits came down by 10.3%.

With the reduction in outstanding loans, net interest income, which is the difference between income from loan and interest paid on deposit, dropped 5% to Rs 1985.28 cr. However, this decline was more than made up by the 35.86% rise in other income to Rs 2089.88 cr. Of this, treasury income was Rs 714 crore compared with a loss of Rs 594 crore in the year-ago quarter.

Despite slowdown in M&A and capital market activity, the bank reported a flat fee income of Rs 1,319 crore. Ms Kochhar said the bank would cut costs further and look at increasing productivity from new branches.

Provisioning rose by 67% to Rs 1323.65 cr but this was due to a one-time restructuring exercise, she added. In a conference call with analysts, NS Kannan, CFO, said that except life insurance none of the bank’s subsidiaries would require capital infusion during the current fiscal. ICICI’s life insurance subsidiary, ICICI Prudential, is expected to break even towards the end of the next fiscal.

“Even though net interest income was slightly lower and provision coverage declined to 51%, we see these as minor negatives. Our main expectations were regarding execution of the bank’s present strategy, which continues to be commendable,” said Vaibhav Agrawal, vice-president, research (banking) Angel Broking.

Fall in deposits

More branches, lower operating expenses and ratio of low- cost deposits improving to 30.4% are quite favorable. We believe by 2010, the bank will be very well positioned to benefit from the improving economic environment,” said Vaibhav Agrawal, vice-president , research (banking) Angel Broking. On Friday, the ICICI Bank scrip closed down 1% at Rs 766.85 on BSE.

The net interest margin was maintained at 2.4%. The decrease in net interest income was mainly due to a decrease in advances by 11.6%. Advances dropped to Rs 1,98,101 cr from Rs 2,24,145.9 cr in the corresponding quarter and Rs 2,18,310.8 cr in the first quarter. Advances on retail loans fell to 47% against 55% in Q1 FY09 as the bank looks at running down its unsecured loans.

Ms Kochhar said that corporate and international advances rose both in absolute and percentage terms to 40% from 35% a year ago.

Deposits fell to Rs 2,10,236 crore from Rs 2,34,460 cr in the year-ago quarter and Rs 2,18,348 crore in the preceding quarter. Ms Kochhar said that savings accounts grew by Rs 3,500 cr from the previous quarter while current accounts dropped by Rs 2000 cr.

She added that the bank had taken high costs deposits in the third quarter of the previous fiscal which it will allow to run down when they mature in the third quarter of the current fiscal. Current account and savings accounts ratio improved to 30.4% from 27.6% last year and 28.7% in the preceding quarter. Capital adequacy ratio stood at 17.38% against 13.42% last year.